Question

Assume that Timberline Corporation has 2019 taxable income of $270,000 for purposes of computing the §179 expense. It acquired the following assets in 2019: (Use MACRS Table 1, Table 2, Table 3, Table 4 and Table 5.)

	Purchase
Asset	Date		Basis
Furniture (7-year)	December 1	$	480,000
Computer equipment (5-year)	February 28		120,000
Copier (5-year)	July 15		60,000
Machinery (7-year)	May 22		510,000
Total		$	1,170,000

Required:

1. a-1. What is the maximum amount of §179 expense Timberline may deduct for 2019?

2. a-2. What is Timberline’s §179 carryforward to 2020, if any?

Answer 1

Answer
a-1.	§179 expense Timberline may deduct for 2019 is $ 2,70,000
a-2.	Timberline's §179 carry forward to next year is $ 7,30,000
Computation of §179 expense and carry forward:
Sr.No.	Description	Amount($)	Explanation
1	Total assets purchased	$11,70,000
2	§179 phase-out threshhold	$25,00,000	2018 179 limit
3	maximum §179 expense phase out	$ 0	(1)-(2) as the cost is less than threshhold limit so we take it as 0 as it cannot be in negative
4	Maximum §179 expense before phase-out	$10,00,000	2018 179 limit
5	maximum §179 expense phase out	$ 0	from (3)
6	Maximum §179 expense after phase-out	$10,00,000	(4) -(5)
7	Taxable income before §179 deduction	$ 2,70,000	Given (Maximum upto taxable income)
8	§179 expense after taxable income limitation	$ 2,70,000	Lower of (6) or (7)
9	§179 carry forward to next year	$ 7,30,000	(6)-(8)

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